The Jobs of Yesteryear: Creative Destruction

Search Carpe Diem

There are now more than 5,800 posts in the Carpe Diem archives dating back to September 2006, and I expect to hit the 6,000 mark in the next month or so. The entire archive is searchable by keyword(s) in one of two ways:

1. At the top left-hand corner of the screen, there is a Blogger search function in the box to the left of where it says "Follow." It's not marked very well, except by a small magnifying glass icon, so it's probably easy to miss. This search function is somewhat limited, and often misses many posts that do contain the search word, and only returns a certain maximum number of results, and might not go all the way back to the earlier posts in the archive. It works best for finding recent posts, but is not comprehensive.

2. There's a Google search function on the right-hand side of the CD homepage in the "Links" section. It's always been there, but I just moved it up to the top of the "Links" section to make it easy to find. That is a full, comprehensive Google search that will find every post that contains a search word, going all the way back to beginning of the archives without any maximum search results, so I would highly recommend using the full Google search instead of the Blogger search.

Also, somebody was asking about problems with the RSS feed for Carpe Diem, and there shouldn't be any problems, the RSS feature is turned on. If anybody's having troubles, please send me an email and let me know, or leave a comment on this post.

Detroit School Board President Can't Write

"The president of the Detroit school board, Otis Mathis, is waging a legal battle to steer the academic future of 90,000 children, in the nation's lowest-achieving big city district. He also acknowledges he has difficulty composing a coherent English sentence. Here's a sample from an e-mail he sent to friends and supporters on Sunday night, uncorrected for errors of spelling, grammar, punctuation and usage. It begins:"

If you saw Sunday's Free Press that shown Robert Bobb the emergency financial manager for Detroit Public Schools, move Mark Twain to Boynton which have three times the number seats then students and was one of the reason's he gave for closing school to many empty seats.

Here's another example of President Mathis' writing:

Do DPS control the Foundation or outside group? If an outside group control the foundation, then what is DPS Board row with selection of is director? Our we mixing DPS and None DPS row's, and who is the watch dog?

Ms. Berman asks some tough questions:

"Is it absurd for a man who cannot write a simple English sentence to serve as the board president? Or to lead the elected board of a district that ranks at the nation's bottom for literacy?

Because of his struggles and perseverance, Mathis describes himself as a role model. But is he?"

Thanks to Colin, Mike Carlson and GW South for all directing me to this story.

Legalize It!

The graph above highlights the grim reality for those on the growing kidney waiting list - demand for kidney transplants keeps growing, while the supply of transplant operations is basically flat. As of today 83,573 patients are on the waiting list, according to the United Network for Organ Sharing, and only about 20% of those patients will actually get a kidney this year. As recently as the early 1990s, patients on the waiting list had a greater than 50 percent chance of receiving a kidney in a given year, but the situation has worsened every year since 1991. Almost 13 patients on the waiting list die every single day of the year, and most of those deaths would be easily preventable, except that a 1984 federal law (co-sponsored by Al Gore) makes it illegal for organ donors to receive any financial compensation. Think about it: Everybody involved in a kidney transplant operation gets paid and profits financially: the surgeons, the nurses, the hospitals, the pharmaceutical companies, the companies that make the hospital equipment and supplies, etc., in other words everybody EXCEPT the kidney donor, who gets nothing? How can that possibly make sense?

Basic Economics: When the demand for kidneys exceeds the supply by a factor of 5 and increases every year, simple economics tells us that the chronic kidney shortage results from an artificial price that is too low, in this case zero. The only way to effectively and permanently solve the kidney shortage is to legalize the victimless crime of accepting financial compensation for donating a kidney.

"Excess" Teenage Unemployment vs. Minimum Wage Yesterday I featured the Wall Street Journal editorial on the minimum wage (WSJ here and CD post here), and it's generated some criticism (see one example here). The top graph above was my version of the WSJ graph that accompanied its article, showing the relationship between teenage unemployment rate and the increases in the minimum wage between 2002 and 2010. It's true that unemployment rates for all groups were rising over that period, and the rising jobless rate for teens might have been because of the general economic slowdown and not necessarily as a result of the minimum wage hikes, and that's a valid criticism.

However, the bottom graph attempts to better isolate the effects of the minimum wage increases between 2007 and 2009 by plotting the difference between the teenage jobless rate and the overall jobless rate, i.e. "excess teen unemployment," and the minimum wage. During the 2002-2007 period when the minimum wage was $5.15 per hour, teenage unemployment exceeded the national jobless rate by about 11% on average. Each of the three minimum wage increases was accompanied by about a 2 percentage point increase in the amount that the teenage jobless rate exceeded the overall rate, from 11 to 13% after the 2007 increase, from 13% to 15% following the second hike and from 15% to 17% following the last increase. The 17.5% "excess teen unemployment" in October 2009 was the highest on record, going back to at least 1972, and was almost 5 percent higher than the peak teen jobless rate gap in the last recession (12.7% in June 2003). Remember that unskilled minimum wage workers are in direct competition with skilled workers. Especially during an economic downturn, unskilled workers have a potentially powerful weapon and advantage that can give them a competitive edge over skilled workers in a weak labor market - low wages. But between 2007 and 2009, politicians took away the competitive advantage of unskilled workers at the time they need it most, by boosting the minimum wage for unskilled workers by 42%, and essentially pricing them right out of the worst economy and labor market since the early 1980s.Bottom Line: Economic theory and empirical evidence suggest that the overall effect of a minimum wage increase is always negative, on net, and can never be positive, on net. So the only real disagreement is how negative the effect will be, not whether it's negative on balance.After all, if minimum wage laws could have positive net effects and politicians can legislate the creation of wealth with artificial price controls, why are they always being so stingy and miserly with such pitifully small increases; why don't they boost the minimum wage for unskilled workers up to something more respectable like $25, $50 or $75 per hour?

Friday, March 05, 2010

National Grammar Day: March 4 (March Forth)

Yesterday was National Grammar Day: "Language is something to be celebrated, and March 4 is the perfect day to do it. It's not only a date, it's an imperative: March forth on March 4 to speak well, write well, and help others do the same!"To celebrate National Grammar Day, the Grammar Girl has prepared these Top Ten Grammar Myths. In honor of National Grammar Day, here's my personal choice for the most abused grammar/spelling rule in the English language: the frequent misuse of "it's" (contraction for "it is") when it should be "its" (possessive). Exhibit A: A Google search shows 72,600 results for the incorrect phrase "meet it's obligations." Exhibit B: A Google search shows more than 9 million results for the incorrect phrase "at it's best." What's so hard about such a simple rule and why do so many people get this wrong so frequently - I see it almost daily, and frequently in the comments on CD? It's pretty basic: "It's" is always a contraction for "it is" and if you can't substitute "it is" for "it's" in a sentence, you know it's wrong, e.g. "the company couldn't meet it's obligation," and "boxing at it's best" are both wrong because you can't substitute "it is" in those sentences for "it's."

Government Data: More Than 95% of Americans Who've Tried Crack or Meth Are NOT Regular Users

"I believed the Drug Enforcement Administration's claim that drugs like crack and meth routinely addict people on first use. But Jacob Sullum, who wrote "Saying Yes", says, "If you look at the government's own data about patterns of drug use, it clearly is not true."

The data are remarkable: 8.5 million Americans have tried crack, but there are only 359,000 regular users. The government defines "regular use" as using a drug at least once in the past 30 days. More than 12 million tried meth, but only 314,000 still take it. The story is similar for heroin. Most people who try these "instantly addictive drugs" do not get "hopelessly addicted." They give them up on their own. [MP: According to government data, 95.8% of Americans who have tried crack are NOT regular users, and 97.4% of those who have tried meth are NOT regular users.]

As Sullum puts it: "The vast majority of people who use illegal drugs do not become heavy users, do not become addicts; it does not disrupt their lives. In fact, I would argue it enhances their lives. How do we know that? Because they use it."

But on the news, we constantly see people whose lives have been destroyed by drugs. Sullum says: 'When you have prohibition, the most visible users are the ones who are most anti-social, most screwed up. They're the ones who come to the attention of the police. ... People who present themselves as experts on drug use, because they come into contact with all these addicts, have a very skewed perspective because they are seeing a biased sample. The people who are well adjusted, responsible users are invisible.'"

Minimum Wage, Maximum Teenage Joblessness

"There's plenty of competition, but our vote for the recent act of Congress that has caused the most economic hardship goes to the May 2007 law raising the minimum wage in three stages to $7.25 an hour from $5.15. Rarely has a law hurt more vulnerable people more quickly.

A higher minimum wage has the biggest impact on those with the least experience or the fewest skills. That means in particular those looking for entry-level jobs, especially teenagers. And sure enough, as nearly all economic models predict, the higher minimum has wreaked havoc with teenage job seekers, well beyond what you would expect even in a recession.

Most Democrats won't bend on the minimum wage because it is a core union demand, but free thinkers ought to at least consider the teenage job problem. The long-term danger is that we are building in a higher level of structural unemployment as our least-skilled workers find it harder to climb onto the first rung of the job market.

Washington could at least establish a teenage, or sub-minimum, wage closer to $5 an hour. More than half of all minimum wage workers get a pay raise within one year on the job, so wages will rise naturally with experience and talent. More young people will be hired, and more will learn what it takes to get ahead in America."

MP: The charts above (top chart shows all teens and the bottom chart shows black teens) illustrate the adverse effects on teenage unemployment rates from the three increases in the minimum wage of 13% in 2007, 12% in 2008 and 11% in 2009, totalling to a whopping 41% from $5.15 in early 2007 to $7.25 by July 2009. Before the three-step increase, the teenage jobless rate was choppy from month-to-month but had been fairly stable within a range of between 14-18% over a number of years from 2002-2006.

But then just the first increase in the minimum wage to $5.85 drove teenage unemployment above 20%, and it's stayed there ever since, rising to almost 28% last year before gradually falling to 25% in February. The story is even worse for black teenagers by a factor of 2, since their jobless rates are almost twice as high as the overall teen rate, reaching a high of almost 50% last year, before "improving" slightly to 42% in February.

As the WSJ points out, the minimum wage can have long-term negative effects over a lifetime:

"Most readers remember the work habits they learned from their first job. Showing up on time, being courteous to customers, learning how to use technology—such habits are often more valuable than the actual paycheck. Studies have confirmed that when teens work during summer months or after school they have higher lifetime earnings than those who don't work. So raising the minimum wage may inadvertently reduce lifetime earnings."

Bottom Line:Artificially raising wages for unskilled workers reduces the demand for those workers at the same time that it increases the number of unskilled workers looking for work, which results in an excess supply of unskilled workers. Period. And another term for an "excess supply of unskilled workers" is an "increase in the teenage jobless rate." Despite the wishful thinking of politicians and labor unions, the laws of supply and demand are not optional.

Congress Declares War on Health Savings Accounts

"While Congress has been debating health reform, employers have been creating new consumer-driven health care (CDHC) plans. In fact, CDHC plans are the only type of health insurance that has been shown to reliably change patient and doctor behavior in ways that lower costs and improve the quality of care.

More than half of employers now offer consumer-driven options, including Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs). In 2010, nearly 18 million people will be enrolled. Federal legislation can stop progress in its tracks, however.

For example, the health care bill passed by the Senate (December 24, 2009) does not directly outlaw HSA-eligible plans, but it restricts HSA options in insidious ways that will delay, deny, defeat and ultimately kill them. The proposed Senate health reform does not focus on improving health or health care. It is more about political power, centralizing federal control, growing government and expanding bureaucracies."

Record 5-Month Increase in Temporary Workers

1) Manufacturing overtime hours decreased slightly to 3.4 hours in February from 3.5 hours in January, which was the highest level since August 2008 (see graph). This marks the first decline in overtime hours following ten straight months that overtime hours either increased or stayed the same as the previous month, which followed 16 months of declines (or no change) in average overtime hours. Despite the February decrease of .10 hours, overtime hours are still 26% above the level last February of 2.7 hours.

2) The number of temporary help workers increased in February by 47,500 to 2,008,700 employees, the highest level since December 2008 (see graph above). The February increase follows similar recent monthly increases of 50,200 in January and 49,700 in December. Temporary workers increased in February for the fifth straight month - the first time since 2005 of five consecutive monthly increases. The 284,000 increase in temporary jobs since the September-low is the largest 5-month increase since this data series started in 1990.

As I reported on Tuesday, The American Staffing Association's Staffing Index increased almost 11% this week from a year ago, the highest annual increase in three years. That 11% increase marked the 13th consecutive week of positive (or flat) increases in the ASA Staffing Index compared to the same week in the previous year, following 80 consecutive weeks of decreases from May 2008 through mid-November 2009.

The fifth monthly increase in Temporary Help Workers according to the BLS, along with similar recent improvements in the ASA Staffing Index, provide evidence that the labor market is gradually improving. In these early stages of economic recovery, employers remain cautious in their hiring decisions, and use temporary workers initially to meet the higher demand for their products. Hopefully, as the economic rebound gathers greater momentum in the coming months and employers become more confident about a continued expansion, they'll start hiring permanent workers.

Bring Back the Robber Barons: The Market Entrepreneurs Though, NOT Political Entrepreneurs

"According to Hillsdale College historian Burton W. Folsom in his book "The Myth of the Robber Barons: A New Look at the Rise of Big Business in America," market entrepreneurs like Rockefeller, Vanderbilt and Hill built businesses on product and price. Hill was the railroad magnate who finished his transcontinental line without a public land grant. Rockefeller took on and beat the world's dominant oil power at the time, Russia. Rockefeller innovated his way to energy primacy for the U.S.

Political entrepreneurs, by contrast, made money back then by gaming the political system. Steamship builder Robert Fulton acquired a 30-year monopoly on Hudson River steamship traffic from, no surprise, the New York legislature. Cornelius Vanderbilt, with the slogan "New Jersey must be free," broke Fulton's government-granted monopoly.

If the Obama model takes hold, we will enter the Golden Age of the Political Entrepreneur. The green jobs industry that sits at the center of the Obama master plan for the American future depends on public subsidies for wind and solar technologies plus taxes on carbon to suppress it as a competitor. Politically connected entrepreneurs will spend their energies running a mad labyrinth of bureaucracies, congressional committees and Beltway door openers. Our best market entrepreneurs, instead of exhausting themselves on their new ideas, will run to ground gaming Barack Obama's ideas.

If the goal is job growth, we need to admit one fact: Political entrepreneurs create fewer jobs than do market entrepreneurs. We need new mass markets, really big markets of the sort Ford, Rockefeller and Carnegie created. Great employment markets are discoverable only by people who create opportunities or see them in the cracks of what already exists—a Federal Express or Wal-Mart. Either you believe that the philosopher kings of the Obama administration can figure out this sort of thing, or you don't. I don't."

Crowding Out in Pictures

Politicians Are Partly Responsible for Higher Medical Costs and They Now Want More Control?

"What adds to health care costs are politicians at both state and federal levels who mandate additional benefits to be paid for by insurance companies, thereby driving up the cost of insurance. If medical insurance simply covered risks-- which is what insurance is all about-- that would be far less expensive than covering completely predictable things like annual checkups. Far more people could afford medical insurance, thereby reducing the ranks of the uninsured.

But all the political incentives are for politicians to create mandates forcing insurance companies to cover an ever increasing range of treatments, and thereby forcing those who buy insurance to pay ever higher premiums to cover the costs of these mandates. That way, politicians can play Santa Claus and make insurance companies play Scrooge. It is great political theater. Politicians who are pushing for a government-controlled medical care system say that it will "keep insurance companies honest." The very idea of politicians keeping other people honest ought to tell us what a farce this is. But if we keep buying it, they will keep selling it." ~Thomas Sowell

"The Monster Employment Indexrose by ten points in February, as employers resumed hiring activity after January’s seasonal lull. The long-term growth rate turned positive, with the Index up 2% year-on-year, for the first time since December 2007 suggesting some improvement in the underlying demand for labor (see chart above)." Other highlights for February include: 1. All 50 states and DC increased online job opportunities led by Nebraska, while Oregon experienced the mildest rise. Mississippi led all states in terms of year-over-year growth, followed by Michigan and Indiana.

2. Online hiring demand rose in 19 of the 23 occupational categories. Architecture and engineering; life, physical, and social sciences; computer and mathematical; and legal posted large monthly gains as reflected by the rise in the professional, scientific, and technical services industry as a whole.

3. Online recruitment activity rose in all major metropolitan markets, with Detroit registering the sharpest gain. Online job demand also increased in San Diego and Houston mainly driven by heightened demand for management; and office and administrative support occupations.

From 200 in 2006, Retail Clinics Now Top 1,200 For First Time Ever; An Amazing 6X Increase in 3 Years

MP: At the end of 2006, there were only 200 retail clinics in the United States. As of March 1, 2010 the number of retail clinics operating surpassed 1,200, which is an amazing 6-fold increase in just over 3 years for the number of convenient, affordable retail clinics operating in the U.S. At the same time that Congress and the President orchestrate a government takeover of America's health care system and capture all of the media attention, a more silent revolution is taking place, as market-based alternatives like convenient, low-cost retail clinics are expanding daily, saving American consumers millions of dollars and putting Americans back in charge of their health care spending.

"Favorable views of labor unions have plummeted since 2007, amid growing public skepticism about unions' purpose and power. Currently, 41% say they have a favorable opinion of labor unions while about as many (42%) express an unfavorable opinion (see graph below). In January 2007, a clear majority (58%) had a favorable view of unions while just 31% had an unfavorable impression."

ISM Non-Manufacturing Index Highest Since 2007

"Economic activity in the non-manufacturing sector grew in February for the second consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business. In February, the Non-Manufacturing Index (NMI) registered 53 percent, indicating growth in the non-manufacturing sector for the second consecutive month. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

The Non-Manufacturing Business Activity Index increased 2.6% to 54.8%, reflecting growth for the third consecutive month. The New Orders Index increased 0.3% to 55%, and the Employment Index increased 4% to 48.6%. The Prices Index decreased 0.8% to 60.4% in February, indicating an increase in prices paid from January. According to the NMI, nine non-manufacturing industries reported growth in February."

"The V-shaped recovery started earlier in the manufacturing sector but the service sector is now getting on board. The ISM Services index hit 53 in February despite a record blizzard on the East Coast and unusually large snowfall in the Midwest. The business activity index, which has an even stronger statistical link with real GDP growth than the overall index, rose to 54.8, the highest level since October 2007."

Markets in Everything: Bone Marrow. NOT.

"Every year, 1,000 Americans die because they cannot find a matching bone marrow donor. Minorities are hit especially hard. Common sense suggests that offering modest incentives to attract more bone marrow donors would be worth pursuing, but federal law makes that a felony punishable by up to five years in prison.

That is why on October 28, 2009, adults with deadly blood diseases, the parents of sick children, a California nonprofit and a world-renowned medical doctor who specializes in bone marrow research joined with the Institute for Justice to launch a legal fight against the U.S. Attorney General to put an end to a ban on offering compensation for bone marrow donors.

The National Organ Transplant Act (NOTA) of 1984 treats compensation for marrow donors as though it were black-market organ sales. Under NOTA, giving a college student a scholarship or a new homeowner a mortgage payment for donating marrow would land everyone—doctors, nurses, donors and patients—in federal prison for up to five years.

NOTA's criminal ban violates equal protection because it arbitrarily treats renewable bone marrow like nonrenewable solid organs instead of like other renewable or inexhaustible cells—such as blood—for which compensated donation is legal. That makes no sense because bone marrow, unlike organs such as kidneys, replenishes itself in just a few weeks after it is donated, leaving the donor whole once again. The ban also violates substantive due process because it irrationally interferes with the right to participate in safe, accepted, lifesaving, and otherwise legal medical treatment. For more information go here."

MP: This seems like a basic question of property rights. If individuals own their own cells: blood, bone marrow, hair, semen and eggs, then they have a right to sell their own property, i.e. their own cells. If individuals are not allowed to sell their own property, then they don't really own their own cells, and if they don't own their own cells, then doesn't that really mean that the state/government owns your cells?

Tuesday, March 02, 2010

The Energy Information Administration released final data today for 2009 domestic natural gas production (data here), and the graph above shows that production hit a new record level in 2009, breaking the previous record set in 2008. The 2.2% increase in 2009 follows increases of 4.4% in 2008, 4.8% in 2007, and 0.33% in 2006, bringing last year's production to a level 12.2% above the output in 2006. This surge in domestic natural gas production over the last three years has enabled the United States to overtake Russia as the world's No. 1 producer of natural gas, and is all due to advanced drilling methods now being used to drill for gas through a type of rock known as shale. Read more here.

Vehicle Sales Up 13%, Ford Leads with 43% Jump

The table above (click to enlarge) shows February U.S. vehicle sales (data here), ranked by the percentage change from February of last year. Overall sales in February were up 13.3% compared to last year (91,320 more vehicles were sold last month compared to February 2009), and Ford led the industry with a 43.4% increase, and capturing almost half (43,000 vehicles) of the 91,320 unit increase from last February.

ASA Staffing Index Surges 11% From A Year Ago

Here's a new (to me) index that was featured on the front page of yesterday's WSJ in the "Vital Signs" section.

"The American Staffing Association (ASA) Staffing Index estimates weekly changes in the number of people employed in temporary and contract work. ASA developed the index to provide a current measure of staffing industry employment trends. The index helps answer the question, "How's business?" It allows staffing companies to evaluate their performance against a national metric on both a weekly and long-term basis. The ASA Staffing Index also serves as a valuable resource for economists, journalists, analysts, researchers, and policy makers who are interested in current trends in staffing employment."

"Staffing employment in February is 10% higher than in the same month last year, according to the ASA Staffing Index. The index for February is 80, up from 79 for January."

MP: On a weekly basis, the Staffing Index reached 81 for the week of February 15 (data here), and is up almost 11% from the same week in 2009, which is the highest annual increase in three years. The 11% increase for February 15 marks the 13th consecutive week of positive (or flat) increases in the ASA Staffing Index compared to the same week in the previous year, following 80 consecutive weeks of decreases from May 2008 through mid-November 2009.In February, the BLS reported that temporary workers had increased in January for the sixth straight month, and along with the recent improvement in the ASA Staffing Index, these two positive trends provide evidence that the labor market is gradually improving. In these early stages of economic recovery, employers remain cautious in their hiring decisions, and use temporary workers initially to meet higher demand for their products. As the economic rebound gathers greater momentum and employers become more confident about continued expansion, they'll start hiring permanent workers.

Markets in Everything: Yike Bike, Urban Transport

Milton Friedman, Economic Reforms Saved Chile

"Milton Friedman has been dead for more than three years. But his spirit was surely hovering protectively over Chile in the early morning hours of Saturday. Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.

Earthquake magnitudes are measured on a logarithmic scale. The earthquake that hit Northridge in 1994 measured 6.7 on the Richter scale. But its seismic-energy yield was only half that of the 7.0 quake that hit Haiti in January, which was the equivalent of 2,000 Hiroshima-sized bombs exploding all at once.

By contrast, Saturday's earthquake in Chile measured 8.8. That's nearly 500 times more powerful than Haiti's, or about one million Hiroshimas. Yet Chile's reported death toll—711 as of this writing—was a tiny fraction of the 230,000 believed to have perished in Haiti."

MP: From a previous CD post, the top chart above helps to document graphically what has accurately been described as the “Chile economic miracle.” Up until the early 1980s, when the first round of economic reforms (1974–1983) were starting to have a positive effect, Chile’s economic performance was among the weakest of the Latin American countries, with annual increases of real GDP per capita averaging only 0.76% from 1913 to 1983. Additional economic reforms in 1985 and 1990 that included trade liberalization supercharged Chile’s economy, and annual growth in real per capita output since 1983 has averaged an impressive 4.2% per year.

Before the economic reforms, with only 0.76% annual growth, it took almost an entire century for living standards to double in Chile; living standards now double every 17 years with 4.2% real growth, and that’s a real economic miracle!

One major factor in Chile’s amazing economic success has been its active pursuit since the 1990s of becoming one of the world’s most open and free markets. To help overcome its natural handicap of being a small and remote country, Chile has become a world leader in free trade, demonstrated by its free trade agreements with more than 50 countries around the world, which give its consumers and companies access to more than half of the world’s customers and markets.

The bottom chart above shows that 2009 GDP (PPP) per capita in Chile (2009) is the third highest in The Americas for the major countries (data here).

Monday, March 01, 2010

Back in the Old Days When the "Single Payer" Was the Patient, There Was "Self-Rationing"

"What is the biggest complaint about the current medical care situation? "It costs too much." Yet one looks in vain for anything in the pending legislation that will lower those costs. One of the biggest reasons for higher medical costs is that somebody else is paying those costs, whether an insurance company or the government (see chart above). What is the politicians' answer? To have more costs paid by insurance companies and the government.

Back when the "single payer" was the patient, people were more selective in what they spent their own money on. You went to a doctor when you had a broken leg but not necessarily every time you had the sniffles or a skin rash. But when someone else is paying, that is when medical care gets over-used — and bureaucratic rationing is then imposed, to replace self-rationing.

Virtually everything that is proposed by those who are talking about bringing down the costs of medical care will in fact raise those costs. Mandates on insurance companies? Why are insurance companies not already doing those things that new mandates would require? Because those things raise costs by an amount that people are unwilling to pay to get those benefits.

If not, it would be a slam dunk for the insurance companies to add those benefits to the policies and raise the premiums to cover them. What politicians want to do is look good by imposing mandates, and then let the insurance companies look bad by raising the premiums to cover the additional costs. It is a great political game, but it does nothing to lower medical costs." ~Thomas Sowell

From yesterday's Washington Post:Wal-Mart has more than 10,000 suppliers in China. In addition, about a million farmers supply produce to the company's 281 stores in China. If Wal-Mart were a sovereign nation, it would be China's fifth- or sixth-largest export market. So the company hopes that small measures taken by all suppliers start to add up. Its 200 biggest suppliers in China have already trimmed 5% of their energy use.

In the past, environmental concerns have taken a back seat to growth in China and to costs for Wal-Mart. And China and Wal-Mart have come under sharp criticism for conditions in factories. Yet pollution now threatens China's growth; as a result, awareness of climate change and energy security has spread in China. Likewise, as consumers grow more environmentally aware, Wal-Mart's executives have responded. On Thursday, the company pledged to reduce its greenhouse gas emissions by 2015.

New suppliers are screened for environmental practices by Wal-Mart. Many China experts say Wal-Mart's guidelines could be more important than the government's.

"They are the rule setters," said Ma Jun, director of the Institute of Public and Environmental Affairs, a Beijing-based group. "Before Wal-Mart only cared about price and quality, so that encouraged companies to race to the bottom on environmental standards. They could lose contracts because competition was so fierce on price."

Wal-Mart's suppliers have been forced to get serious about pollution, Ma said. "Wal-Mart says if you're over the compliance level, you're out of business. That will send a powerful signal."

Indiana Saves $8m, 35% on Health Costs with HSAs

Indiana's Health Savings Accounts: The state deposits $2,750 per year into an account controlled by the employee, out of which he pays all his health bills. Indiana covers the premium for the plan. The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.

Unused funds in the account—to date some $30 million or about $2,000 per employee and growing fast—are the worker's permanent property. For the very small number of employees (6% last year) who use their entire account balance, the state shares further health costs up to an out-of-pocket maximum of $8,000, after which the employee is completely protected.

The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America. Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%. State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative. In the second straight year in which we've been forced to skip salary increases, workers switching to the HSA are adding thousands of dollars to their take-home pay.

Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an average lower cost per prescription of $18. They were admitted to hospitals less than half as frequently as their colleagues. Differences in health status between the groups account for part of this disparity, but consumer decision-making is, we've found, also a major factor.

Overall, participants in our new plan ran up only $65 in cost for every $100 incurred by their associates under the old coverage.

It turns out that, when someone is spending his own money alone for routine expenses, he is far more likely to ask the questions he would ask if purchasing any other good or service: "Is there a generic version of that drug?" "Didn't I take that same test just recently?" "Where can I get the colonoscopy at the best price?"

By contrast, the prevalent model of health plans in this country in effect signals individuals they can buy health care on someone else's credit card. A fast-food meal costs most Americans more out of pocket than a visit to the doctor. What seems free will always be overconsumed, compared to the choices a normal consumer would make. Hence our plan's immense savings.

The Indiana experience confirms what common sense already tells us: A system built on "cost-plus" reimbursement (i.e., the more a physician does, the more he or she gets paid) coupled with "free" to the purchaser consumption, is a machine perfectly designed to overconsume and overspend. It will never be controlled by top-down balloon-squeezing by insurance companies or the government. There will be no meaningful cost control until we are all cost controllers in our own right.

Americans can make sound, thrifty decisions about their own health. If national policy trusted and encouraged them to do so, our skyrocketing health-care costs would decelerate.

Update: "If you love the bargain Health Savings Account (HSA) that insures you just for the essentials, you may be shocked to learn that you could lose all of those good things under the rules proposed in the two bills that herald a health-care revolution." Read more here. Thanks to Colin for the pointer in the comments below.

200 Chicago Ministers Back South Side Wal-Mart

I've been following the South Side Chicago Wal-Mart controversy since last summer, summarized very well here in this editorial:

"If there’s ever an illustration of how “progressive” elites and organized labor are keeping the very people they supposedly care about locked up on the plantation, it’s their consuming opposition to a new Wal-Mart store on the South Side (of Chicago).

The impoverished, unemployed, blacks, seniors, teens—they’ve all been getting a good frigging by the organized campaign by white liberals and powerful unions to block the construction of only the city’s second Wal-Mart, at 83rd Street and Stewart Avenue."

"A coalition of Chicago ministers is readying a campaign for more Wal-Mart stores in Chicago — and preparing another against aldermen who stand in the way. The alliance of just over 200 ministers, representing more than 100,000 congregants, will first demand that Mayor Richard M. Daley grant administrative approval to begin construction of a Wal-Mart at the Chatham Market shopping center, saving that project from falling into foreclosure. The group also will pressure aldermen to approve that store and others in retail-starved neighborhoods such as Englewood and Pullman.

If, as appears likely, more Wal-Marts don't get the green light this year, the ministers say they'll mount a campaign against aldermen who oppose the big retailer's expansion. Taking a page from union groups that have held Wal-Mart back, the ministers say they will support candidates in favor of the store with political advertising and urge their congregants to vote against dissenters."

ISM Report: Economy Expands for the 10th Month

Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the 10th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee said "The manufacturing sector grew for the seventh consecutive month during February. While new orders and production were not as strong as they were in January, they still show significant month-over-month growth. Additionally, the Employment Index is very encouraging, as it is up 2.8 percentage points for the month to 56.1%. This is the third consecutive month of growth in the Employment Index. With these levels of activity, manufacturers are seemingly willing to hire where they have orders to support higher employment."

When It Comes to His Own Energy Usage/Carbon Footprint, Al "Bigfoot" Gore Uses 19x U.S. Average

"It would be an enormous relief if the recent attacks on the science of global warming actually indicated that we do not face an unimaginable calamity requiring large-scale, preventive measures to protect human civilization as we know it.

Of course, we would still need to deal with the national security risks of our growing dependence on a global oil market dominated by dwindling reserves in the most unstable region of the world, and the economic risks of sending hundreds of billions of dollars a year overseas in return for that oil. And we would still trail China in the race to develop smart grids, fast trains, solar power, wind, geothermal and other renewable sources of energy — the most important sources of new jobs in the 21st century.

But what a burden would be lifted! We would no longer have to worry that our grandchildren would one day look back on us as a criminal generation that had selfishly and blithely ignored clear warnings that their fate was in our hands. We could instead celebrate the naysayers who had doggedly persisted in proving that every major National Academy of Sciences report on climate change had simply made a huge mistake.

I, for one, genuinely wish that the climate crisis were an illusion. But unfortunately, the reality of the danger we are courting has not been changed by the discovery of at least two mistakes in the thousands of pages of careful scientific work over the last 22 years by the Intergovernmental Panel on Climate Change. In fact, the crisis is still growing because we are continuing to dump 90 million tons of global-warming pollution every 24 hours into the atmosphere — as if it were an open sewer."

MP:In 2007, Al Gore's mansion in Nashville burned through an average of 17,720 kWh of electricity per month (see Al Gore's energy bills from 2005 to mid-2008 here, via the Tennessee Center for Policy Research, which first reported on Al Gore's energy usage in 2007), which is almost 19 times as much as the monthly electricity consumed by the average U.S. household (936 kWh), and almost 3 times as much electricity as the average U.S. commercial customer (6,408 kWh), see chart above (Dept. of Energy data here). So it's just a little hard to take Al Gore's preaching about climate change too seriously when his own household's contribution to the "climate crisis" is almost 20 times greater of the average American household, and almost three times greater than even the average commercial user of electricity.

So it's classic Al Gore. He talks about a "criminal generation that selfishly and blithely" dumps "global-warming pollution into the atmosphere as if it were an open sewer." However, if personal energy usage was "criminal," Al Gore might be at the top of "America's Most Wanted List," see chart above. Terms that come to mind to describe Al Gore's carbon footprint include "Bigfoot," "Paul Bunyan," "Brobdingnagian," "Sasquatch," or "the elephant in the room." To paraphrase blues pianist Mose Allison, "If polluting was criminal, he'd live a life of crime."

Maybe the article could have been titled, "We Can't Wish Away Climate Change, But We Can Reduce Our Personal Carbon Footprint, But Only If We Really Want To: I'm Not Willing to Change My Lifestyle, But the Rest of You Should."

Earthquake in Chile

Voter Unhappiness w/Congress Hits Record Level

Voter unhappiness with Congress has reached the highest level ever recorded by Rasmussen Reports as 71% now say the legislature is doing a poor job (see chart). That’s up ten points from the previous high of 61% reached a month ago. Only 10% of voters say Congress is doing a good or excellent job.

Saturday, February 27, 2010

The Family Physician Cartel Objects to the Expansion of Services Offered By Retail Clinics

"The American Academy of Family Physicians (AAFP) Board of Directors has revised its official policy on retail health clinics to reflect the Academy's opposition to a growing expansion of scope of services provided by many such clinics. In addition, the Academy has discontinued its practice of entering into formal agreements with retail health clinics that support the AAFP's desired attributes.

The AAFP created its retail health clinic policy in 2005 when it became clear that the clinics were increasing in number nationwide. Subsequently, five retail health companies signed agreements with the AAFP to abide by the Academy's desired attributes for such clinics. The four retail health organizations that still hold signed agreements -- MinuteClinic, RediClinic, The Little Clinic and BellinHealth Fast Care -- have been notified that those agreements will be terminated.

In a letter sent to those companies, the Academy said its decision was not intended to reflect negatively on any retail health clinic company. Rather, it was made after observing the evolution of the retail health clinic model into expanded service lines. "The practice of having formal agreements has run its course," says the letter.

When the first few retail health clinics appeared on the health care scene in 2000, the business model featured clinics staffed primarily by nonphysician professionals, such as nurse practitioners. Clinics were designed to treat patients for a limited number of acute illnesses, such as sore throats and ear infections.

Now, nearly a decade later, clinics are operating in 32 states. According to the Convenient Care Association, the number of retail clinics has grown to nearly 1,200 nationwide (MP: And further expansion is projected, see chart above). Notably, two of the nation's largest retail health chains have disclosed to the AAFP their intent to move forward into chronic disease management.

"The AAFP revised its policy because some clinics are expanding their scope of service beyond what the Academy thinks is appropriate," said AAFP President Lori Heim, M.D. The expansion of clinic services most likely reflects the reality that retail clinics need to treat more than walk-in patients with acute health problems to survive economically, she added.

In its revised policy statement, the Academy notes that it does not endorse retail health clinics and believes that the clinics could interfere with the medical home model of care. The AAFP "opposes expansion of their scope of service" and stands against the diagnosis, treatment and management of chronic medical conditions in the retail clinic setting.

Heim commended family physicians who have expanded their office hours and changed their office procedures to allow for same-day appointments to accommodate patients with urgent health care needs. "We need to see more of those kinds of changes, because we know that above all else, patients like the convenience that retail health clinics offer," she said."

MP: Notice in the last paragraph that family physicians have responded to the competition from retail clinics by starting to operate more like retail clinics with expanded hours and same-day appointments. Competition is a great thing for consumers - too bad it seems like the AAFP now wants to limit it.

Is the Dismal Science Really a Science? Is There Really Such a Thing as Free Beer?

"The defenders of modern macroeconomics argue that if we just study the economy long enough, we'll soon be able to model it accurately and design better policy. Soon. That reminds me of the permanent sign in the bar: Free Beer Tomorrow.We should face the evidence that we are no better today at predicting tomorrow than we were yesterday. Eighty years after the Great Depression we still argue about what caused it and why it ended.

If economics is a science, it is more like biology than physics. Biologists try to understand the relationships in a complex system. That's hard enough. But they can't tell you what will happen with any precision to the population of a particular species of frog if rainfall goes up this year in a particular rain forest. They might not even be able to count the number of frogs right now with any exactness.

We have the same problems in economics. The economy is a complex system, our data are imperfect and our models inevitably fail to account for all the interactions.

The bottom line is that we should expect less of economists. Economics is a powerful tool, a lens for organizing one's thinking about the complexity of the world around us. That should be enough. We should be honest about what we know, what we don't know and what we may never know. Admitting that publicly is the first step toward respectability."

Rising Wages in China = Re-Valuing China's Currency

NEW YORK TIMES -- "Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage. As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses. Factory wages have risen as much as 20 percent in recent months (see chart).

Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods. Rising wages could also lead to greater inflation in China.

Reasons for the labor shortage?

For one, the Chinese government has rapidly expanded postsecondary education. Universities and other institutions of higher learning enrolled 6.4 million new students last year, compared to 5.7 million in 2007 and just 2.2 million in 2000. At the same time, China’s birth rate has been sliding steadily ever since the introduction of the “one child” policy in 1977. Labor shortages have returned quickly in recent weeks as these long-term trends have collided with a recovery in overseas demand for Chinese goods. Consumer spending is also rising briskly; auto sales more than doubled last month from a year before, and this has created many jobs in retailing, restaurants, hotels and other inland businesses.

Though the wage boost increases the prospect of inflation, it may have another more salutary aspect. The Obama administration has been pushing China to let the renminbi rise against the dollar, which would erode some of China’s formidable advantage in export markets. Rising wages in China have the same effect — while also giving Chinese families more spending power."HT: Lyle Meier

"It never would’ve happened without CNBC — or, in all likelihood, at any other time of year.

This slow-poke game, which originated in 16th-century Scotland, has captivated the Type-A world of Wall Street almost by accident. CNBC, whose market chatter is the background music on trading floors, switches to curling from Vancouver shortly after the closing bell."

Another Trade Re-write: U.S. Consumers, American Companies Slammed With New Steel Taxes

One has to envypity the insignificant amount of pull U.S. steel workersconsumersand steel-using companies have. The majority of U.S.-China trade agitation is caused byimposes signifcant costs on this one relatively tinyhuge part of the U.S. economy.

"The United States government on Wednesday imposed preliminary dutiestaxes ranging from 11 to 13 percent on its owncompanies (and their employees, customers and shareholders) that purchase steel pipe from China to offset government subsidies, the Commerce Department said.

The decision puts further strain on US-China trade relations, already tested by disputes over other US trade actions and China's currency policy.

It is a victory for US Steel Corp and the United Steelworkers union, which filed a petition in October asking for protection against the more efficiently produced and lower-priced Chinese imports, but a huge loss for American companies that purchase steel and U.S. consumers who purchase products made from steel."

Jan. Home Sales Drop Sharply from Dec., But Are At Highest Level for Month of January Since 2007

"Existing-home sales fell in January but are above year-ago levels, according to the National Association of Realtors. Existing-home sales – including single-family, townhomes, condominiums and co-ops – dropped 7.2% to a seasonally adjusted annual rate of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5% above the 4.53 million-unit level in January 2009 (see top two charts above).

Lawrence Yun, NAR chief economist, said there is still some delay between shopping and closing that affected current sales. “Most of the completed deals in January were based on contracts in November and December. People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales,” he said. “Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”

Total housing inventory at the end of January fell 0.5% to 3.27 million existing homes available for sale, which represents a 7.8-month supply at the current sales pace, up from a 7.2-month supply in December, but down from a 9.6-month supply in January 2009 (see bottom chart above)."

Other reports for January real estate sales:

1. Sales of existing homes and condos in South Florida rose in January, though prices continued to fall. Statewide, existing home sales were up 28% last month, to 10,465 homes sold from 8,174 homes sold a year ago, according to Florida Realtors. Existing condo sales rose 81% statewide compared to the previous year's sales figure. This marks the 17th consecutive month that Florida sales activity has increased in a year-to-year comparison.

2. Reflecting a trend seen across much of the West, Phoenix region January home sales fell harder than normal from December, but they were still the highest for a January since 2007.
There were continued signs of price stability for resale houses. The median price paid for existing single-family detached houses didn’t decline from the year-ago level for the first time since July 2007, though it slipped a bit from December.

3. Las Vegas region January home sales fell more than usual from December but were still the highest for that month since 2007 thanks to relatively strong demand for condos and other sub-$200,000 homes. The overall median sale price declined from December, but one home-type category – resale single-family detached houses – showed continued signs of price stability.

MP: Many reports are expressing concern about the strength of the real estate recovery because of the huge drop from December sales, but year-to-year January sales increased at 11.5%, and are at the highest level for that month in three years both nationally and in markets like Phoenix and Las Vegas.